Prioritise VAT fraud and online trading risks, report tells HMRC

HM Revenue and Customs (HMRC) needs to do more to tackle VAT fraud and the emerging threat of losses from online trading, a report by the National Audit Office (NAO) has advised.

The report found that £32 billion of tax went uncollected in 2010/11, with £9.6 billion of this consisting of uncollected VAT.

Although the NAO said the tax authority had prevented £579 million of fraudulent VAT payments in 2012/13, it highlighted that it failed to carry out any real-time checks across VAT returns. A comprehensive plan to tackle the threat of losses due to online trading, through sites such as eBay, is also yet to be produced.

Amyas Morse, head of the NAO said: "HMRC has three strategic priorities: to improve customer experience; to reduce its operating costs; and to reinvest money from efficiency savings to generate increased tax revenue."

"But it also requires the help of legislators and changes in international tax rules, if it is to respond effectively to the ‘borderless' internet world."

Other key findings from the NAO report include:

HMRC collected £475.6 billion in tax revenue in 2012/13 - £1.4 billion (0.3 per cent) more than in 2011/12

Corporation tax revenue decreased by £900 million

Income tax and national insurance revenue decreased by £800 million

VAT revenue increased by £1.4 billion.

Elsewhere, the report stated that HMRC had successfully piloted its new Real Time Information (RTI) system - which allows PAYE payments to be reported when they are made rather than at the end of the tax-year - but had yet to test full functionality of end-of-tax-year reconciliations.

The RTI system is being rolled out to employers from April 2013 but the programme's budget 'does not include contingency for any significant extra development costs', it said.